Durham joins fight to intervene in LGC case

Friday

Jan 18, 2013 at 3:15 AM

By Andrea Bulfinchabulfinch@fosters.com

DURHAM — On behalf of more than a dozen communities who feel the Bureau of Securities Regulations did not adequately address what they each perceived to be an injustice of monetary returns from the Local Government Center, four towns, including Durham, have filed a motion to intervene in the appeal of the case “Local Government Center, Inc. v. NH Bureau of Securities Regulation,” (BSR) currently before the state Supreme Court.

Peterborough, Northfield, Salem and Durham all worked to draft the motion forwarded to the court. As “intervenors,” those towns have requested of the court that their motion be granted, and that they be allowed to brief before the court the following two issues: “Whether the hearings officer erred in failing to fashion a remedy that will allow that refunds shall be in proportion to each member’s and former member’s contributions to that standing surplus amount and earnings?” And “Whether the NH Supreme Court should exercise its equitable powers to fashion a remedy that the calculation and refund of any surplus shall be in proportion to each member’s or former member’s annual contribution to said illegal surplus, or such other equitable remedy as the Court shall see fit?”

Pam Brenner, Peterborough town administrator stated, “The information provided by the LGC in response to Durham, Peterborough, and Salem’s RSA 91-A request reveals that in any given year, the membership of the Trusts changed. Awarding the refund based on the August 16, 2012 Order date does not capture accurately the amounts that Trust members contributed to the Trusts over the time that the surplus accrued.”

She also said the affected communities have yet to receive a formal response from the BSR.

In a statement issued Thursday by Durham town administrator Todd Selig regarding the motion, The action marked “an unfortunate turn of events in which municipal taxpayer funds are now being diverted to litigate the very organization charged with representing the interests of towns and cities across NH, as well as the public agency charged with regulating it.”

The BSR did find wrongdoing in the management of the LGC’s risk pools. The issue lies in the order that monies only be returned to current members of the LGC.

In August, State of N.H. hearings officer Donald Mitchell found that the ”LGC had engaged in actions or inactions that resulted in multiple violations.”

“The BSR, however, did not distinguish among members. Some joined the risk pools early or late, some left early or late, and some joined, left, and later rejoined. By ordering the money returned to current members, it created windfalls for some, but inadequate recompense for others. That is, some members will receive an arbitrarily larger share than their contribution, and some an arbitrarily smaller share,” Selig said.

In the statement, Selig explained that “public employees paid a significant portion of the health care premiums,” and they will receive a corresponding portion of any health care surplus refund payment from their employers.

The LGC proposes to issue refunds to only those communities who were members of its health and property liability trusts as of Aug. 16, 2012, the date of the order.

Though he was unavailable Thursday afternoon for comment, Salem Town Manager Keith Hickey said,“In sum, the Order found that but for these illegal actions, there would have been additional excess earning and surplus that would be available to return to LCG members on an annual basis — members such as Durham, Northfield, Peterborough, and Salem.”

Northfield Town Administrator Glenn Smith stated, “The municipalities have requested the NH Supreme Court to determine an equitable approach to distributing the surplus generally requiring the LGC to calculate the amount of surplus that accrued each year from the year that the LGC first unlawfully retained excess surplus, and to allocate the surplus proportionally among the members of the Trusts by year.”

The statement issued Thursday also states that these four towns in particular have petitioned the court to allow them to ”address the hearings officer’s failure to fashion a remedy that will allow refunds in proportion to members’ contributions. Due to the dates they joined and left, these four — Durham, Northfield, Peterborough, and Salem — believe they represent all members whose share of the refund will be inadequate compared to the share of the money they contributed.”

The wrongdoings are said to have begun in 2003, continuing for about seven years, and were due to “a failure by LGC to distribute to Trust members on an annual basis excess earnings and surplus, improper transfers of monies from the Health Care Trust and Property Liability Trust to the Workers’ Compensation Trust, and a transfer of the Health Care Trust’s and Property Liability Trust’s respective interests in real estate to the Local Government Center Real Estate Inc. without consideration.”

The LGC was ordered to pay back a total of $53.4 million as follows: $33.2 million from HealthTrust; $17.1 million from the property-liability pool siphoned from HealthTrust; and $3.1 million from property-liability for communities that joined after June 14, 2010.

“The return of tens of millions of dollars by the LGC to its members of the Health Trust and Property-Liability Trust programs is mandated by the hearing officer’s order to be in proportion to each member’s contributions. Durham, Northfield, Peterborough, Salem and other political subdivisions contributed to the surplus with taxpayer funds. Those funds should therefore be returned. It is an issue of basic fairness and equity — no more, no less,” Selig said.

The BSR outside counsel, Andru Volinsky told the Concord Monitor, “The bureau will need to look at this … There is nothing in the law that says you have to be a member to get your surplus back.”